Goldman, JPMorgan Reap Fee Bonanza from Private Equity-Backed IPOs

LONDON–Goldman Sachs Group Inc., JPMorgan Chase & Co. and other investment banks have booked record fees in 2014 for arranging the flotation of companies owned by private equity firms on stock markets around the world, according to Dealogic.

Private equity firms have paid $1.3 billion to banks to arrange initial public offerings for their companies so far this year, more than double the $498 million paid in the same period in 2013. Banks earned a total of $3.6 billion in fees by advising private equity firms on the sale of companies, including follow-on share sales, convertible bond sales and sales of companies outright to other companies.

The share price performance of the IPOs was less impressive — in the short term at least. Shares of the private equity-backed IPOs are up 8.1% to Aug. 7, while the shares of IPOs that weren’t backed by private equity firms are up 25.9% in the same period. However, private equity-backed IPOs performed better in the longer term than all other IPOs. They outperformed in every year from 2010 to 2013, according to Dealogic. Private equity-backed IPOs from 2010, for example, are up 48.4%, while all other IPOs are down 19.2%, according to the data.

Europe was the leading source of private equity-backed IPO fees for investment banks, generating a record $595 million, more than triple the amount earned in the same period last year. The shares of European private equity-backed IPOs are down 2.9% this year, while the shares of other IPOs are up 2.8%. European private-equity backed IPOs outperformed other IPOs from 2010 to 2012, although they underperformed other IPOs from 2013, according to the data.

Goldman Sachs had the biggest share of the global fees from selling companies for private equity firms, with 11.1%, followed by JPMorgan with 8.2% and Bank of America Merrill Lynch with 7.2%.